Hog sector optimistic heading into New Year

CNS Canada –– A rally in U.S. hog futures over the past few weeks is also being felt in the Canadian industry, which has brought some optimism to the sector heading into the New Year.

“The isoweans are stronger, which tells us that there is greater demand in the U.S. going into the spring and summer,” said Neil Ketilson, general manager of the Saskatchewan Pork Development Board (SaskPork).

Weanlings were trading at less than $10 at their low point, he noted, but have now climbed back to over $40.

“Even though the U.S. is processing record numbers of hogs, the internal demand and exports are very good,” said Ketilson, adding that packers are also seeing good cutout values.

A number of new packers are coming on line in North America in 2017, which will add to the demand side of the supply/demand equation and contribute to the upside potential on price, he said.

“Hogs have made a dramatic turnaround over the month of December,” said Tyler Fulton, director of risk management with H@ms Marketing in Manitoba, adding that “it’s a shocker, really.

“If you’re looking at fundamental information, things are very positive,” he said, noting the U.S. saw a record weekly slaughter in 2.544 million hogs in the latest reporting period, with no price concessions on the wholesale price side.

Packers are seeing some of their best margins of the past 12 years, “and some of that margin is being given back to producers,” he said.

With hog prices currently at about $150 per 100 kg, “most independent hog producers can eke out a profit at that level,” Fulton said, but noted the seasonality of the hog market usually sees lower prices at Christmas time.

“Regardless of what you attribute it to, (the rally) has been well received by hog producers,” said Ketilson.

Feed supplies are ample across Western Canada, although he cautioned high vomitoxin levels were being watched.

“There are certainly challenges, but this business is never a high-margin business.”

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.